Mitt Romney and the Complexities of Debt Ratings

Standard & Poor’s downgrading of U.S. debt would appear to feed perfectly into former Massachusetts Gov. Mitt Romney’s narrative that he’s the man to clean up the mess in Washington. After all, President Barack Obama presided over the historical downgrade on Friday, but Mr. Romney says that while he was governor, S&P upgraded his state’s bond rating.

But when it comes to S&P, nothing is that clear.

In March of 2005, the credit rating firm did indeed upgrade Massachusetts’ bond rating from double-A-minus to double A, still a notch below the federal government’s downgraded double-A plus. Still, S&P had some glowing words for the then-governor. The firm lauded “greater budget certainty” in the Bay State, reduced government spending, prudent management, and “an economy that is deep and diverse and is again producing jobs.” (S&P documents are here and here.)

But the firm also cautioned that “by some measures, the Commonwealth’s debt rations … are amongst the highest in the nation.” The state’s unfunded pension liability, at $12.1 billion, was large, S&P said at the time.

“The Commonwealth, like all states, will continue to be challenged with meeting rising health care costs, ongoing spending pressures for public safety. Debt service costs and pension contributions are rising,” S&P warned, noting constraining factors holding back future upgrades.

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